Which of the following statements is correct?
A) Economic order quantity is the quantity at which the annual inventory holding cost is equal to the annual ordering cost
B) Economic order quantity is the quantity at which annual inventory holding cost has been maximized
C) Economic order quantity is the quantity at which annual inventory ordering costs is minimized
D) Economic order quantity is the amount at which inventory costs are offset by sales

Question

Quizplus · Accepted Answer

Economic order quantity is the quantity at which the total cost of ordering and holding inventory is minimized. This means that at the economic order quantity, the annual inventory holding cost is equal to the annual ordering cost. It is not about maximizing inventory holding cost or minimizing inventory ordering cost. Neither is it about inventory costs being offset by sales.

Which of the Following Statements Is Correct